US EARLY MORNING: US equity futures are lower, Thursday's ECB and Friday's US CPI coming into focus

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  MARKETS: US index futures are lower (ES -0.4%, YM -0.3%, RTY -0.4%, NQ -0.5%). Treasury yields are narrowing as the curve flattens, but 10s are still above 3.00% (Treasury auctions 3yr notes today, and will auction 10s and 30s on Wednesday and Thursday respectively). APAC shares were mixed overnight amid higher yields; the RBA surprised with a larger rate hike than the consensus was expecting (+50bps vs expected +25bps). In Europe, German industrial orders slipped for the third straight month, UK PM Johnson survived a confidence vote and party rebellion, and will try and get things back on track with a policy announcement today. Politically, we should prepare for President Biden to be out on the charm offensive. The President is preparing to give a speech to the Summit of the Americas this week. Politico reported that the White House “has found itself either limited or helpless in its efforts to combat the forces pummelling them” and morale was “plummeting amid growing fears that the parallels to Jimmy Carter, another first-term Democrat plagued by soaring prices and a foreign policy morass, will stick” – so expect him to highlight all of the wonderful things his administration has been doing to help Americans; in reality, this will probably mean that he reiterates recent remarks on the improving labour market, and re-emphasize that combatting ‘Putin’s price hike’ is the priority, and it is the ‘independent Fed’ that is raising rates to try and manage price pressures.


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  COMMENT: As we await our next batch of macro catalysts (the main ones being the ECB confab on Thursday, US and China CPI on Friday, FOMC next Wednesday), we’ve essentially seen horizontal action in the S&P 500 over the last two weeks while the VIX has stabilised around 25 recently. A piece in Bloomberg notes that the relationship between the index and the volatility gauge has been changing recently, and instead of moving in an opposite direction to each other, they have both declined together in three of the last five weeks, something which BBG says has not been seen since October 2020. Some strats have been noting that volatility traders’ demand for protection appears to be easing. Susquehanna said that “even as volatility has pulled back from the highs, S&P skew remains quite flat, suggesting relatively limited concern with regards to the downside tail,” adding that the decline in the VVIX Index -- or volatility of the volatility index -- was alluding to muted volatility for the VIX index, which Susquehanna says could reflect limited demand for VIX optionality.


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  DAY AHEAD: The docket is once again quiet today, with risk events later in the week/next week eyed. EIA’s STEO and the API inventory data after hours will be of note for the commodity traders. The US international trade balance for April should be digested without any drama. Weekly RedBook data will offer a glimpse of retail activity at the end of May. Fed remains on blackout ahead of its meeting next Wednesday, while the ECB is in blackout ahead of Thursday’s announcement (our ECB preview is here). Full Day ahead calendar here.

EQUITY NEWS:

FINANCIALS:

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  Regulation - SEC Chairman Gensler directed staff last year to explore ways to make stock markets more efficient for small investors and public companies, preparing to propose reforms this Autumn, according to the WSJ. One idea being floated was to require brokerages to route individual investors’ orders into auctions where trading firms compete to execute them, WSJ said, adding that Gensler plans to provide some details in a Wednesday address.


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  Citigroup Inc. (C) - APAC CEO says the bank will hire 3k for the Asia institutional banking business as part of a growth push, according to Reuters. APAC CEO also added that China’s economic and geopolitical challenges would not alter its strategy.


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  Crypto - A Reuters special report details how Binance became a hub for hackers, fraudsters and drug traffickers. The report claims that for five years, Binance served as a conduit for the laundering of at least USD 2.35bln in illicit funds.


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  Stoxx Europe 50, Adidas (ADDYY), Glencore (GLNCY) - Adidas will be removed from the Stoxx Europe 50 on June 20th, and be replaced by Glencore, due to the fast-entry rule.


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  Deutsche Bank (DB) - German bank has relocated hundreds of IT workers from Russia to Germany, lowering its dependency on technology centre supporting its investment and corporate bank, FT reported.


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  Standard Chartered (SCBFY) - Marshall Wace reported a short position of just under 0.6%, according to The Times citing an FCA filing.


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  Julius Baer (JBAXY) - Is to expand into Qatar in the next phase of growth in the Middle East.

TECH:

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  Apple Inc. (AAPL) - Apple’s keynote event saw the introduction of iOS 16, iPadOS 16, macOS 13 Ventura, watchOS 9, a new M2 Apple silicon chip (which will be in the upcoming MacBook Air and 13-inch MacBook Pro), and a new buy-now-pay-later product, MacRumors reported. Crucially, it did not announce the highly anticipated alternative reality headset.


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  Coupa Software Incorporated (COUP) - Q1 EPS 0.08 (exp. 0.05), Q1 revenue USD 196.4mln (exp. 190.6mln). Exec said it started the FY with record quarterly total revenue and subscription revenue. Sees Q2 EPS between 0.07-0.10 (exp. 0.05), and sees Q2 revenue between USD 202-205mln (exp. 205.3mln). FY23 EPS seen between 0.21-0.27 (exp. 0.20), and FY23 revenue outlook is between USD 838-843mln (exp. 840.3mln).


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  GitLab Inc. (GTLB) - Rose almost 10% after results which topped expectations. Q1 loss per share of 0.18 (exp. -0.27), Q1 revenue USD 87.4mln (exp. 77.8mln). Q2 revenue seen between USD 93.5-94.5mln (exp. 89.7mln). Sees FY23 revenue between USD 398-402mln (exp. 389.9mln).


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  Lattice Semiconductor Corporation (LSCC) - Lattice Semiconductor expanded its long-running partnership with AMI, will explore more ways to optimise their technologies to complement one another.


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  Remitly Global, Inc. (RELY) - Named Hemanth Munipalli as CFO.

COMMUNICATIONS:

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  Meta Platforms (FB) - Guy Rosen named chief information security officer, the first person to fill that role at the social media company, according to Reuters.


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  Twitter, Inc. (TWTR) - Twitter said it has and will continue to cooperatively share information with Elon Musk to consummate deal in accordance with terms of merger agreement.


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  Zoom Video Communications, Inc. (ZM) - Announced Google Cloud exec Greg Tomb will join as President.


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  AMC Entertainment Holdings, Inc. (AMC), GameStop Corp. (GME) - An analysis by Reuters said that bearish investors were ramping up short bets against meme stocks GameStop and AMC Entertainment, spotlighting how short sellers have been emboldened during the recent broader market amid signs of retail fatigue.

CONSUMER STAPLES:

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  Kohl’s Corporation (KSS), Franchise Group, Inc. (FRG) - Franchise Group in advance talks to acquire Kohl’s for roughly USD 8bln, WSJ reports, confirming earlier reports. KSS said the exclusivity period for talks was three weeks, adding that a deal was not guaranteed.

CONSUMER CYCLICAL:

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  Peloton Interactive, Inc. (PTON) - Peloton hires Amazon cloud executive Liz Coddington as new CFO, current CFO Jill Woodworth is leaving the company in shake-up of the top management.


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  Tractor Supply (TSCO) - Sees Q2 EPS outlook greater than 3.48 (exp. 3.46); said that as it moved through April and weather has normalised, it has experienced strong sales for its seasonal products, and is on track to deliver record Q2 2022 results.


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  Ted Baker (TBAKF) - Ted Baker’s chosen bidder drops takeover plans as hunt for buyer continues, City AM reported; Ted Baker said it received a number of proposals, board will now decide whether to proceed with any of these.

ENERGY:

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  Equinor (EQNR), Transocean (RIG) - Equinor awarded an additional nine firm wells plus two one-well options to its ongoing contract with Transocean for the harsh environment semi-submersible Transocean Spitsbergen, Upstreamonline reported. The estimated USD 181mln backlog contract extension is expected to begin in October 2023 and conclude in April 2025.


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  Callon Petroleum Company (CPE) - Callon raised its FY22 FCF outlook to over USD 900mln. Updated its operational capital budget range of USD 790-810mln (vs initial forecast USD 725mln) due to inflationary service cost pressures, resulting in average price increases of approximately 20% in key drilling and completion items vs 2021 levels.

MATERIALS:

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  5E Advanced Materials, Inc. (FEAM), Corning Incorporated (GLW) - 5E entered into a non-binding letter of intent with Corning to supply boron specialty materials, used in the manufacture of Corning’s products.


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  Holcim (HCMLY) - Has agreed to sell its Zimbabwean Cement unit to a local firm, as part of its asset disposal plan.

INDUSTRIALS:

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  Ferrovial (FRRVY) - Buckthorn Partners reportedly working with One Equity Partner on potential a takeover of Ferrovial’s Amey, Sky News reports.

HEALTH CARE:

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  Johnson & Johnson (JNJ), Emergent BioSolutions Inc (EBS) - Johnson & Johnson formally terminates agreement to make COVID-19 vaccine for Emergent BioSolutions, Reuters reported.


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  Eli Lilly (LLY) - Presented new data for Mounjaro in type 2 adult diabetes. Separately, a whistle blower sued LLY alleging she was fired after highlighting poor manufacturing practices and data falsification in a  diabetes drug.


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  Roche (RHHBY) - Vabysmo has been approved by Swissmedic, the Swiss surveillance authority for medicines and medical devices.


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  HealthEquity, Inc. (HQY) - Q1 EPS 0.27 (exp. 0.26), Q1 revenue USD 205.7mln (exp. 204mln). Exec said that with the benefit of an improved economy and higher interest rates, it was off to a fast start for the FY. Raised FY23 EPS outlook to 1.23-1.32 (exp. 1.27, prev. 1.21-1.30), and raised its FY23 revenue outlook to USD 827-837mln (exp. 830mln, prev. 820-830mln).


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  National Health Investors, Inc. (NHI) - Reiterated its FY22 normalised FFO/shr outlook between USD 4.38-4.48 (exp. 4.50).

UTILITIES:

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  Snam (SNMRY) - De Nora is poised to announce IPO plans next week, seeking valuation of over EUR 4.5bln, according to Reuters (Snam owns a 64% stake).

REAL ESTATE:

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  Welltower Inc. (WELL) - Slips 2.3% after hours; narrowed its Q2 EPS outlook to 0.22-0.25 (prev. 0.20-0.25). Now expects to achieve normalised funds from operations in a range of 0.84-0.87/diluted share (prev. guidance 0.82-87) per diluted share. In its update, said pricing power remains robust with strong recognized renewal rate increases and improving street rates.


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  Kilroy Realty Corporation (KRC) - Kilroy Realty signs leases totalling 190,000 square feet during Q2.


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  UK Housing Names - After surviving a confidence vote and rebellion, PM Johnson will in a Cabinet meeting call for a renewed drive to get more people onto the property ladder.

07 Jun 2022 - 09:25- Fixed IncomeResearch Sheet- Source: Newsquawk